GBP/USD – British pound steady as CPI matches forecast

GBP/USD is unchanged in the Wednesday session. In North American trade, the pair is trading at 1.2652, up 0.10% on the day. On the release front, British CPI dipped to 2.3% in November, down from 2.4% a month earlier. This matched the estimate. There are no major U.S. releases on the schedule, but investors will be busy, keeping a close eye on the Federal Reserve, which is expected to raise rates to a range between 2.25 and 2.50 percent. On Thursday, the U.K. releases retail sales and the Bank of England is expected to maintain rates at 0.75 percent. The U.S will publish the Philly Fed Manufacturing Index and unemployment claims.

Brexit has been in the headlines on a daily basis, but the markets will shift focus on Thursday to economic releases. Investors will be hoping for a rebound from retail sales, which has posted two straight declines. The forecast for November stands at 0.3 percent. This will be followed by the Bank of England rate decision. The bank is expected to stay on the sidelines and maintain rates at 0.75 percent.

Brexit will not be on the backburner for very long. Earlier this week, Prime Minister May announced that parliament will vote on the Brexit withdrawal agreement in mid-January, and with a no-deal scenario a very real possibility, traders can expect further volatility from the British pound in the coming weeks.

The markets are expecting the Federal Reserve is expected to raise interest rates on Wednesday, which would mark the fourth rate hike in 2018. The odds of a rate hike have dropped sharply – only last week, the odds of a hike stood at 77%, but are currently at 66%. A key factor in the drop is the recent sell-off in global stock markets. Rate hikes are unusual when stock markets are in a downward spiral, but the Fed is likely to press the rate trigger. At the same time, the Fed may try to soothe the nervous markets with a cautious message about further tightening next year, which has sent the U.S. dollar lower ahead of the Fed meeting. Just a few months ago, there was heady talk of three or four rates in 2019, but analysts are now predicting just one hike, as the U.S economy is showing signs of slowing down.

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GBP/USD Fundamentals

Wednesday (December 19)

  • 4:30 British CPI. Estimate 2.3%. Actual 2.3%
  • 4:30 British PPI Input. Estimate -2.9%. Actual -2.3%
  • 4:30 British RPI. Estimate 3.2%. Actual 3.2%
  • 4:30 British Core CPI. Estimate 1.8%. Actual 1.8%
  • 4:30 British HPI. Estimate 3.3%. Actual 2.7%
  • 4:30 British PPI Output. Estimate -0.1%. Actual 0.2%
  • 6:00 British CBI Industrial Order Expectations.Estimate 6. Actual 8
  • 8:30 US Current Account. Estimate -125B. Actual -125B
  • 10:00 US Existing Home Sales. Estimate 5.20M. Actual 5.32M
  • 10:30 US Crude Oil Inventories.Estimate -2.7M. Actual -0.5M
  • 14:00 US FOMC Economic Projections
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <2.50%
  • 14:30 US FOMC Press Conference

Thursday (December 20)

  • 4:30 British Retail Sales. Estimate 0.3%
  • 4:30 British CBI Realized Sales
  • 7:00 BoE Official Bank Rate Votes. Estimate 0-0-9
  • 7:00 BoE Monetary Policy Summary
  • 7:00 BoE Official Bank Rate. Estimate 0.75%. Actual 0.75%
  • 7:00 British Asset Purchase Facility. Estimate 435B
  • 7:00 British Asset Purchase Facility Votes. Estimate 0-0-9
  • 8:30 US Philly Fed Manufacturing Index. Estimate 15.6
  • 8:30 US Unemployment Claims. Estimate 219K
  • 19:01 British GfK Consumer Confidence

*All release times are EST

*Key events are in bold

GBP/USD for Wednesday, December 19, 2018

GBP/USD December 19 at 11:25 EST

Open: 1.2639 High: 1.2679 Low: 1.2607 Close: 1.2652

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2365 1.2488 1.2589 1.2706 1.2812 1.2915

GBP/USD edged higher in the Asian session but gave up some of these gains. The pair lost ground in European trade but has reversed directions in North American trade and moved higher

  • 1.2589 is providing support
  • 1.2706 is the next resistance line
  • Current range: 1.2589 to 1.2706

Further levels in both directions:

  • Below: 1.2589, 1.2488, 1.2365 and 1.2229
  • Above: 1.2706, 1.2812 and 1.2915

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.